A New Industry to be Born from the End of North Sea Oil

It may be small by global standards, but Britain’s oil and gas industry has far greater significance than its size suggests.

Apart from providing a global oil price benchmark — Brent Crude — derived from a blend of sweet North Sea crude types, exploration techniques and production technologies pioneered in the North Sea are used around the world to extract oil from hostile environments. Whatever is done in offshore oil and gas fields around the world, the chances are it was probably done first in the North Sea.

The oil and gas industry is also vital for Britain’s finances. The country still relies on offshore reserves for 55 percent of its energy (Britain became a net oil importer in about 2006), while oil and gas firms paid a fifth of all corporation taxes in 2010-11.

All good things come to an end, however.

Following two production peaks, one in the mid-1980s and the second in 1999 at about 7 million barrels per day, production has declined sharply to about 4 million bpd by 2007 and 3 million bpd today. However, changes to what may appear obscure tax allowances have fired up a renaissance of sorts, particularly in the development of smaller, previously less economically attractive new fields. All of which will ultimately add to the headache that decommissioning will be.

According to the Economist, the British sector of the North Sea alone (Britain shares the seabed, and hence oil reserves, with Norway, Denmark and the Netherlands) is home to more than ten million tons of steel and concrete. One day, when as much oil and gas has been extracted as is feasible, the installations there will have to be removed.

The Economist says dismantling the 5,000-odd wells and platforms and 10,000 kilometers of pipelines will cost around £31 billion ($49 billion) on current estimates, spurring an alternative industry in its own right.

How will this be done?

Suggestions that the life of production platforms could be extended by the widespread conversion to alternative uses, such as bases for wind turbine generators, are probably not economically viable.Platforms cost a fortune to service and maintain while the revenue from turbines is relatively small. A few platforms in shallower waters could provide electrical connection bases for offshore wind farms; the platform would carry the electrical collection and transmission equipment gathering power from individual turbines and managing the transmission to land through existing power cable connections.

Although the technology is far from proved, that has not stopped some from suggesting wave power devices could be anchored to defunct oil or gas production platforms. Where environmental conditions are more favorable, specifically in warmer climes, a number of alternative options may exist for the millions of tons of steel anchored above or standing on our sea beds.

A report last year stated the Gulf of Mexico continental shelf will lose a third of its offshore platforms in the next five years and most of the remaining platforms will be removed in the next 15 to 20 years, depriving the area of an entirely unintended (but nevertheless rich) coral ecosystem. Perversely, it seems rigs are removed because recognizing their environmental role as providing habitat would incur oil companies significant costs in compliance to Federal laws, yet the loss of rig structures in the next five years is estimated to potentially destroy 1,875 acres of coral reef habitat and 7 billion invertebrates.

It is estimated that 49 species of federally managed fish and 25 species of protected invertebrates utilize, to varying degrees, the platform substrate for feeding, spawning, mating, and growing to maturity.

In locations such as the Gulf, clearly many more options exist for alternative uses for some if not all of the existing platforms, but in the harsher conditions of the North Sea, most platforms will ultimately be destined for the scrap heap.